Section 11 Arbitration Act: Once Limitation Period Has Begun, Withdrawal Of Claims Has No Effect On Its Running- Delhi HC

The Petitioner appeared in person to argue the case. Counsel Kanika Aghihotri and Counsel Rohan Anand appeared for the Respondent.

In this case, a petition was filed under Section 11 of the Arbitration and Conciliation Act, 1996 for the appointment of an Arbitrator.

A contract was executed between the parties on 09.10.2000 for work construction of an Underground Reservoir and Booster Pumping Station. The time period for the execution of the contract was extended several times by the Respondent and was finally completed by the Petitioner on 31.01.2005.

After the completion of the work, disputes arose between the parties with regard to the payments due. A notice was sent by the Petitioner to the Respondent for the appointment of an Arbitrator. Pursuantly, the Respondent appointed a sole Arbitrator.

On the very first day of the proceedings, the Arbitrator issued an interim bill by applying the Rules of the Indian Council of Arbitration. The petitioner challenged the mandate of the Arbitrator on the ground that the contract in question did not provide for the application of the Rules of the Indian Council of Arbitration and that the learned Arbitrator had exceeded his jurisdiction. The High Court stayed the proceedings before the Arbitrator, but subsequently, the petition was withdrawn by the petitioner on 20.09.2007.

The sole Arbitrator passed an award on 18.06.2008, awarding costs against the Petitioner on account of the cost of litigation and arbitration fees. Aggrieved, the Petitioner challenged this award before the High Court, and it was disposed of with the Court holding that the fee of the Arbitrator appeared to be exaggerated and ordering a revised amount in favor of the Respondent.

The Petitioner then sent a notice dated 26.07.2019 to the Respondent, thereby invoking the arbitration clause as contained in the contract agreement. The Petitioner demanded the appointment of an Arbitrator as per the procedure given in the contract agreement for adjudication of its claims. Since no response was received from respondents, the Petitioner approached the High Court.

After a perusal of the facts, the High Court found that the petition for the appointment of an Arbitrator was clearly barred by limitation. In that context, it held that "The cause of action in favour of petitioner having arisen in the year 2005, plea of petitioner for reference of the claims to an Arbitrator by way of issuing a second notice dated 26.07.2019, is clearly barred by limitation."

Dismissing the petition, the Court held that "it is clear that the claims which are ex facie barred by limitation need not be referred for decision in the arbitration proceedings. Limitation commences when the cause of action accrues/ arises. The fact that work was completed under the contract in the year 2005 and completion certificate dated 01.03.2005 was issued, is not in dispute. Further, disputes as regards amounts payable to the petitioner arose in the year 2005 when petitioner invoked the arbitration clause. It is well settled that by virtue of Article 137 of the Limitation Act, 1963, limitation period for reference of a dispute to arbitration or for seeking appointment of an Arbitrator is three years from the date on which the cause of action arises. The present petition for appointment of an arbitrator for adjudication of disputes between the parties, is clearly barred by limitation. Further, the claims as raised in the present case pertain to the period before the year 2005. Thus, the claims themselves have also become time barred."